Bank of England coronavirus Pound Sterling UK economy UK economic recovery UK Government borrowing UK economic recovery UK economy
Marketing No Comments

Bank of England expected to impose back-to-back rate hikes for the first time since 2004

Economists expect the Bank of England to hike interest rates consecutively for the first time since 2004 as the central bank looks to steer the U.K. economy through persistent high inflation.

The Bank fired the starting gun on rate rises in December, hiking its main interest rate to 0.25% from its historic low of 0.1%. Since then, data has shown U.K. inflation soared to a 30-year high in December as higher energy costs, resurgent demand and supply chain issues continued to drive up consumer prices.

The December rate hike came despite the omicron Covid-19 variant spreading rapidly throughout the U.K. and threatening to destabilize the economic recovery once again. However, the Covid outlook has improved in recent weeks, compounding anticipation for a 25 basis point hike on Feb. 3.

To find out more about how we can assist you with your Second Charge Mortgage please click here

“If December’s surprise rate hike decision taught us anything, it was, firstly, that the Bank – and especially Governor Andrew Bailey – is clearly worried about elevated rates of headline inflation and the risk of a virtuous wage-price cycle,” James Smith, developed markets economist at ING, said.

Smith suggested that the high-frequency data points to only a “modest and short-lived” economic impact from omicron, making a 25 basis point hike to 0.5% the most likely course of action.

A ‘less hawkish’ high

Deutsche Bank also expects a 25 basis point increase, and senior economist Sanjay Raja expects the Monetary Policy Committee to vote unanimously in favor of such a move.

“With the Bank Rate reaching 0.5%, we expect the MPC to confirm that all APF (asset purchase facility) reinvestments will cease following the February decision,” Raja said in a note Thursday.

“This would see roughly GBP 28bn of reinvestments (~3% of APF) fall out from the Bank’s balance sheet next month with a further GBP 9bn dropped over the remainder of the year.”

Raja expects the MPC’s primary message to be that more modest tightening will be necessary to keep the economy stable, with economists now expecting inflation to peak at 6.5% and take longer to moderate, remaining above the Bank’s 2% target in two years’ time.

“Worries around rising wage expectations and thus services inflation, alongside lingering supply chain pressures should give the MPC further ammunition for more rate hikes over the next several quarters,” Raja said.

What’s more, Deutsche Bank expects the MPC to highlight the wide confidence bands around the inflation outlook.

“The jump in inflation, and particularly energy bills, should weigh on future demand. Tightening global financial conditions should also restrain global growth, and therefore U.K. external demand, and rate rises should also push up borrowing costs for households and firms, tempering GDP growth,” Raja said.

“We continue to see the MPC projecting excess supply at the very end of the forecast horizon (three years’ out), with inflation sitting below the Bank’s 2% target and the unemployment rate edging up as a result.”

This would enable the Bank to stick with a message of only “modest” tightening, and Deutsche sees another 25 basis points hike in August, followed by further hikes in February 2023 and August 2023, taking the Bank Rate to 1.25%.

BNP Paribas brought forward its call for the next hike from May to February as the Covid situation has improved and inflation continues to run even hotter than expected. The French lender’s economists similarly do not believe the MPC’s messaging will introduce any additional hawkishness, and also expects a 25 basis points hike on Thursday.

“In doing so, we expect the monetary policy committee to kick start the process of balance sheet reduction,” BNP Paribas economists said in a note on Wednesday.

“Still, the MPC is likely to be less hawkish next week than the action alone would imply, while we remain of the view that it will deliver a more gradual pace of rate hikes than is priced into markets.”

By Elliot Smith

Source: CNBC

Discover our Second Charge Mortgage Broker services.

UK GDP Sterling BoE UK economy UK economic growth Pound Sterling
Marketing No Comments

UK economy finally bigger than before pandemic in November

UK economy grew by a much stronger-than-expected 0.9% in November, finally taking it above its size just before the country went into its first COVID-19 lockdown, the Office for National Statistics said on Friday.

The world’s fifth-biggest economy was 0.7% bigger than it was in February 2020, the ONS said.

Economists polled by Reuters had forecast monthly gross domestic product growth of 0.4% for November.

“It’s amazing to see the size of the economy back to pre-pandemic levels in November – a testament to the grit and determination of the British people,” finance minister Rishi Sunak said.

Other economies have already recovered their pre-COVID size, chief among them the United States.

Despite November’s growth acceleration, GDP probably took a hit in December when the Omicron coronavirus variant swept Europe, and the loss of momentum is likely to have stretched into January with many firms reporting severe staff absences and consumers still wary of going out.

To find out more about how we can assist you with your Second Charge Mortgage please click here

But health officials think the Omicron infections wave has now peaked in Britain and analysts say the hit to the UK economy is likely to be short-lived, allowing the Bank of England to continue raising interest rates this year.

The ONS said, data revisions aside, GDP in quarterly terms would reach or surpass its pre-coronavirus level in the October-December period of last year, as long as economic output does not fall by more than 0.2% in December.

The ONS said architects, retailers, couriers and accountants had a bumper month in November and construction recovered from several weak months as raw materials became easier to source after problems in global supply chains.

Britain’s economy will still face challenges in the months ahead, even once coronavirus restrictions are relaxed.

“While the UK economy should rebound once Plan B measures are lifted, surging inflation and persistent supply chain disruption may mean that the UK’s economic growth prospects remain under pressure for much of 2022,” Suren Thiru, head of economics at the British Chambers of Commerce, said.

By Shepard Smith

Source: CNBC

Discover our Second Charge Mortgage Broker services.

UK inflation economy Omicron UK economic recovery UK Economy Bank of England
Marketing No Comments

UK economy falters as Omicron wave hits service sector

The UK economy faltered in January, a closely-watched survey showed on Monday, after the rapid spread of Omicron weighed heavily on the service sector.

The flash IHS Markit/CIPS UK Composite Output Index fell to an 11 month-low of 53.4, compared to December’s final reading of 53.6. Most analysts had expected a rise, with consensus at 54.0.

Within that, the flash manufacturing output index strengthened to a five-month high of 53.8 from 53.6 in December. But the manufacturing PMI eased to 56.9 from 57.9, while the services business activity index was 53.3, an 11 month-low compared to December’s 53.6.

IHS Markit noted: “With hospitality, leisure and travel all struggling due to Omicron restrictions, this offset resilient growth in business and financial services.”

Manufacturers fared better during the month as material shortages started to ease. But staff absences affected all sectors, while input cost inflation remained “stubbornly high”, largely reflecting stronger cost pressures in the service sector.

To find out more about how we can assist you with your Second Charge Mortgage please click here

Chris Williamson, chief business economist at IHS Markit, said: “A resilient rate of economic growth in the UK during January masks wide variations across different sectors. Consumer0facing businesses have been hit hard by Omicron, and manufacturers have reported a further worrying weakening of order book growth. But other business sectors have remained encouragingly robust.

“Looking ahead, while the Omicron wave meant the hospitality sector has sunk into a third steep downturn, these restrictions are now easing, meaning this downturn should be brief.”

Duncan Brock, group director at Chartered Institute of Procurement & Supply, said: “Though professional and financial services in particular saw a resurgence in activity, hospitality and travel firms took another body blow as the market place stagnated.

“In the gloomiest month of the year, what is also disappointing for the UK economy is price inflation returning with a vengeance, with the second-highest jump in business expenses since 1998.

“The private sector may be experiencing a sense of two steps forward and one step back with price and supply challenges, but with the strongest level of optimism since August 2021, we may be looking forward to a more favourable trading environment in the months ahead.”

Pantheon Macroeconomics noted: “The further drop in Markit’s composite PMI in January suggests that the Omicron variant continued to weight on activity in the first half of the month.

“As things we stand, we think that GDP dropped by a further 0.2% month-to-month in January, after dropping by about 10.0% in December.

“The drop in the composite PMI, however, likely won’t dissuade the [Bank of England’s] Monetary Policy Committee from increases the Bank Rate at next week’s meeting. For a start, some of the survey’s forward-looking indicators improved: the new orders index of the services survey rose from 56.5, and businesses were the most upbeat about the outlook for in demand since August.

“In addition, near-real-time data show that activity has started to recover as January has progressed, indicating that month-to-month growth in GDP in February likely will be positive.”

The survey was sent to panels of around 650 manufacturers and 650 service provides, with responses collected between 12 and 20 January.

By Abigail Townsend

Source: Sharecast News

Discover our Second Charge Mortgage Broker services.

Bank of England coronavirus Pound Sterling UK economy UK economic recovery UK Government borrowing UK economic recovery UK economy
Marketing No Comments

UK economy above pre-Covid levels in November

The UK economy surpassed pre-Covid levels for the first time in November after recording stronger-than-expected growth.

The Office for National Statistics said gross domestic product (GDP) expanded by 0.9% between October and November.

That was higher than economists’ expectations and meant the economy was 0.7% larger than in February 2020.

But there is concern growth slowed again after the spread of Omicron and the introduction of Plan B measures.

“The economy grew strongly in the month before Omicron struck, with architects, retailers, couriers and accountants having a bumper month,” said ONS chief economist Grant Fitzner.

“Construction also recovered from several weak months as many raw materials became easier to get hold of.”

Analysts at Capital Economics said the economy was boosted by 3.5% growth in the construction sector, adding “the unusually dry weather probably helped”.

It also said manufacturing output also improved and the professional sector also picked up, “apparently due to architectural and engineering activities being brought forward from December”.

What is GDP?

GDP or Gross Domestic Product is one of the most important ways of showing how well, or badly, an economy is doing.

It’s a measure – or an attempt to measure – all the activity of companies, governments and individuals in an economy.

GDP allows businesses to judge when to expand and hire more people, and for government to work out how much to tax and spend.

To find out more about how we can assist you with your Second Charge Mortgage please click here

Rising GDP means more jobs are likely to be created, and workers are more likely to get better pay rises.

If GDP is falling, then the economy is shrinking – bad news for businesses and workers.

The Covid pandemic caused the most severe recession seen in over 300 years, hurting business and employment, and forcing government to borrow hundreds of billions of pounds to support the economy.

Economists had been expecting GDP to expand by 0.4% in November.

Chancellor Rishi Sunak said the stronger growth was “a testament to the grit and determination of the British people”.

But Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “GDP almost certainly dropped in December, as households hunkered down in response to the Omicron variant.”

The Omicron variant emerged at the end of November and Plan B measures were introduced on 8 December.

Mr Tombs said data such as restaurant diner numbers, transport usage and cinema revenues “point to a pullback in consumer services expenditure” last month, while “Omicron also depressed labour supply”.

However, he added: “Omicron looks set to fade almost as quickly as it arrived, thanks partly to the rapid rollout of booster jabs. As a result, we expect the government to allow Plan B rules to automatically expire on 26 January and for GDP to bounce back in February.”

These figures show that the reopening and recovery of the UK economy was motoring just before Omicron struck.

The economy had for the first time regained, on a monthly basis, all the very heavy losses during the pandemic lockdowns. Business had been returning to something approaching normality after the government’s decision to axe restrictions since the summer.

Monthly figures are quite volatile though and usually not provided by other countries. It is possible that the Omicron-linked hit to the economy in December could undo the impressive growth in November on the key fourth quarter figure. Using this more usual and internationally comparable quarterly basis, it is still not certain if the UK economy has recovered these losses.

The bigger question is about the impact of Omicron. With hopes that the rapidly-spreading variant has peaked, economists are now confident it will have far less of a hit than previous Covid waves. Retailers’ results over the festive period have been very encouraging.

But the response of the public and its attitude to going out and spending is the big economic unknown. And while Omicron concern fades, the hits to disposable income from rising prices are very real.

So while the chancellor called today’s GDP milestone “amazing” it’s probably not the moment for celebration.

The ONS said that, on a quarterly basis, in the final three months of 2021 the UK economy will reach or surpass pre-Covid levels seen in the last quarter of 2019 if GDP grows by at least 0.2% in December and there are no downward revisions to figures for October and November.

However, several economists pointed to a bumpy road for growth in the first months of this year.

“We expect growth to slow in 2022 as it will no longer be able to simply rely on the [Covid] rebound effect to propel it,” said Yael Selfin, chief economist at KPMG UK.

“In addition, rising taxes and borrowing costs, as well as elevated inflation, will squeeze households’ purchasing power, while the lingering effects of supply chain bottlenecks together with a persistent shortage of labour could constrain production this year.”

Inflation is expected to hit 6% by spring, according to the Bank of England which raised its key interest rate in December and is forecast to lift borrowing costs again this year.

The government will raise the National Living Wage by 6.6% for over 23 year-olds in April but that is the same month when energy regulator Ofgem will implement the new price cap on household gas and electricity bills.

Ofgem is widely expected to lift the price cap following a sharp rise in wholesale gas prices last year which forced around 20 smaller energy companies out of business.

Also from April, employers, workers and the self-employed will all pay 1.25p more in the pound for National Insurance.

By Dearbail Jordan

Source: BBC News

Discover our Second Charge Mortgage Broker services.

UK economy
Marketing No Comments

UK Economy Looks Forward to a February Bounce-back

The UK economy will shrink during the months of December and January but looks set to rebound in February, according to new research.

Analysis from independent economic and financial research provider Capital Economics finds GDP could fall by as much as 1.0% during December and January, even if further restrictions are not introduced by the government.

“We aren’t factoring in any additional UK-wide restrictions, but we still expect increased consumer caution and self isolations to weigh on economic activity in the first quarter,” says Adam Hoynes, Assistant Economist at Capital Economics.

Prime Minister Boris Johnson on January 04 said the UK would likely see out the Omicron wave of infections without the need for further restrictions, while it was confirmed by Cabinet on Wednesday that existing Plan B measures would be maintained.

The economic costs of existing Plan B restrictions when combined with voluntary caution and self-isolation are however likely to prove significant.

To find out more about how we can assist you with your Second Charge Mortgage please click here

“We now think that GDP will fall by around 1% over December and January together,” says Hoynes. “The number of people forced to self-isolate is becoming increasingly disruptive.”

Data from the ONS showed the spread of Omicron was met with a decline in card spending, mobility and internet searches related to social activities during December, raising expectations or a sharp drop in economic activity.

“Consumer caution in response to Omicron points to a near-1% fall in GDP between November and January,” says Samuel Tombs, Chief UK Economist at Pantheon Macroeconomics.

Further constraints to output in all sectors will come amidst a surge in the numbers of people having to self-isolate, having caught the virus.

To highlight the sale of the current infection wave, the ONS said on January 05 that 1 in 10 people in London had Covid in the week ending December 15. 1 in 15 in England had the virus, 1 in 20 in Wales, 1 in 25 in Northern Ireland and 1 in 20 in Scotland.

Health minister Gillian Keegan said on January 05 that “around a million people are now self-isolating”.

The impact on businesses is significant, a point highlighted by Iceland Managing Director Richard Walker who said 11% of their workforce were now self-isolating.

“The number of people forced to self-isolate is becoming increasingly disruptive,” “it it appears that the recent surge in positive cases is beginning to offset the relaxed isolation rules,” says Hoynes.

Pantheon Macroeconomics anticipate output in the accommodation and food services sector to have fallen by about 15% month-to-month in December with a further 5% fall to come in January.

They assume output in the arts, entertainment and recreation sector dropped by 10% in December and will fall by a further 5% in January.

Output in the transport sector is anticipated to have declined by 3%, and will drop by a further 3% this month.

Covid cases in London look to have peaked already in what amounts to a potential precursor to a peaking in other regions across the UK in January.

This suggests February could see substantive easing in pressure on businesses and consumer activity can recover.

Capital Economics expects economic growth losses suffered in December and January to be recouped in February and March, “if Omicron cases fall as fast as they rose”.

Pantheon Macroeconomics says Omicron appears to be dealing a substantial blow to economic activity at the turn of the year, “but the good news is that GDP should be rising
again in February”.

“In Q2, GDP should be close to the level it would have reached, had the new variant not emerged,” says Tombs.

Written by Gary Howes

Source: Pound Sterling Live

Discover our Second Charge Mortgage Broker services.

UK’s economic growth winter economy plan UK economy UK economic recovery
Marketing No Comments

What does 2022 have in store for the UK economy?

Growth slowed more than expected in 2021Q3, with the GDP increase revised down to 1.1% (QOQ) from 1.3%. Moreover, the Markit surveys suggested activity slowed in December.

Nevertheless, assuming there are no major extensions to Covid-related restrictions, growth should continue into 2022 and GDP could show annual growth of 4% after 7% in 2021.

Prospects are, however, clouded by higher inflation, partly driven by higher energy bills, which will squeeze household incomes. Households are also facing higher taxes and higher interest rates (to over 1% by end-2022, priced in by the markets).

Markit surveys for December suggested growth had stalled in Germany but was still firm in France. US growth also looked firm, though inflationary pressures continued to mount.

To find out more about how we can assist you with your Second Charge Mortgage please click here

Lord Frost resigned as Minister of State in the Cabinet Office and Chief Negotiator of Task Force Europe on 19 December. Foreign Secretary Liz Truss assumed his Brexit responsibilities.

Ruth Lea said “Even though growth should continue into 2022, prospects are clouded by uncertainties. The two main ones are, arguably, the possibility of tighter Covid-related restrictions and, secondly, inflation and the future trajectory of oil and gas prices, major rises of which have been driving inflation higher. On the possibility of tighter restrictions, the Prime Minister has resisted imposing further restrictions so far and, moreover, appears reluctant to do so. Concerning inflation, the annual rate should fall back in 2022H2, not least of all reflecting base effects, assuming there are no further major hikes in energy prices. Indeed, prices may reverse if production is stepped up. But this assumption is a very big, and very uncertain, assumption”.

Source: LLB

Discover our Second Charge Mortgage Broker services.

GBP sterling UK economy pound UK recovery
Marketing No Comments

UK economy grew more slowly than thought before Omicron hit

UK economy grew more slowly than previously thought in the July-September period, before the Omicron variant of the coronavirus posed a further threat to the recovery later in the year, official data showed on Wednesday.

Gross domestic product in the world’s fifth-biggest economy increased by 1.1% in the third quarter, weaker than a preliminary estimate of growth of 1.3% as global supply chain problems weighed on manufacturers and building firms.

That was slower than the economy’s 5.4% bounce-back in the second quarter when many coronavirus restrictions were lifted, the Office for National Statistics said.

Investors are braced for a further slowdown in the fourth quarter of 2021 and a weak start to 2022 due to a rise in COVI9-cases caused by Omicron which has hurt Britain’s hospitality and leisure sector and hit retailers.

Prime Minister Boris Johnson has ruled out new COVID restrictions in England before Christmas but said he might have to act afterwards. Scotland and Wales have tightened controls.

To find out more about how we can assist you with your Second Charge Mortgage please click here

“Although the economy has got better at coping with restrictions with each new wave, the possibility of tighter restrictions in January is further darkening the outlook for GDP,” Bethany Beckett, an economist with consultancy Capital Economics, said.

The ONS said households dipped into their lockdown savings to finance their spending. The savings ratio fell to 8.6% of disposable income, down from almost 11% in the second quarter.

Weakness in the health sector, where test and trace work and vaccinations tailed off, and among hairdressers were partly behind the cut to the third-quarter growth estimate.

A fall in energy output, after a surge in demand during a cold spring in the second quarter, also weighed.

“However, stronger data for 2020 means the economy was closer to pre-pandemic levels in the third quarter,” ONS Director of Economic Statistics Darren Morgan said.

The slump in UK economy last year was now estimated at 9.4%, revised from a 9.7% crash, and the ONS believed GDP in September was 1.5% below where it was at the end of 2019, revised up from the previous estimate of 2.1%.

However, Britain’s progress towards regaining its pre-pandemic economic size, in inflation-adjusted terms, remained behind that of most other big rich economies such as France, Germany and the United States, the ONS said.

Business investment fell by 2.5% in the third quarter from the previous three months and was nearly 12% below its pre-pandemic level.

The Bank of England is hoping for a revival of business investment to help improve Britain’s longer-term growth prospects.

Britain’s balance of payments deficit widened to 24.4 billion pounds ($32.35 billion) as goods exports fell, goods imports grew and foreign companies received more income from their investments in the United Kingdom.

Economists polled by Reuters had expected a smaller deficit of 15.6 billion pounds.

As a share of GDP, the shortfall almost doubled to 4.2% from 2.3% in the second quarter.

By William Schomberg and Andy Bruce

Source: Reuters

Discover our Second Charge Mortgage Broker services.

UK inflation economy Omicron UK economic recovery UK Economy Bank of England
Marketing No Comments

UK economic bounce-back to weaken, analysts say

The United Kingdom’s economic recovery from the coronavirus pandemic slowed between July and September and is expected to be weaker than previously predicted in the coming months, largely because of supply-chain problems and higher energy costs.

Official figures from the Office for National Statistics, or ONS, show consumer spending increased as the UK emerged from pandemic-battling lockdowns, but other sectors of the economy shrank disappointingly.

Overall, growth during the three-month period stood at 1.3 percent, which was well down on the 5.5 percent recorded between April and June. The slowdown leaves the UK economy 2.1 percent smaller today than in the final quarter of 2019.

Grant Fitzner, chief economist at the ONS, told the BBC the service-sector growth was largely down to a tax holiday for property purchases.

“However, these were partially offset by falls in both the manufacture and sale of cars,” he said.

To find out more about how we can assist you with your Second Charge Mortgage please click here

The Guardian newspaper reported on Monday that EY Item Club had used the results, and other data, to predict the “tougher” part of the UK’s economic recovery is yet to happen.

EY said in its autumn forecasts there will be “higher and more sustained inflation” in the coming months, with rises in energy prices and supply chain disruption denting previous estimates.

EY said the UK’s GDP could rise by 6.9 percent this year, instead of the 7.6 percent it had expected. GDP fell by almost 10 percent last year. And EY said GDP growth in 2022 could run at 5.6 percent, instead of the 6.5 percent it had previously predicted.

Martin Beck, chief economic adviser to EY Item Club, told The Guardian: “With the boost from reopening the economy now largely passed, the UK was always expected to enter a tougher phase of the recovery. …Although inflation looks like it’ll peak higher－and stay higher for longer－than first anticipated, it doesn’t look like this will tip into ‘stagflation’; the combination of sluggish growth and persistent high inflation.”

But EY did have some good news. It said unemployment will likely run at 4.3 percent in the final quarter, instead of the 5.1 percent it had previously predicted.

Sky News added on Monday that recent disappointing economic data and a lack of investment had led the head of the Confederation of British Industry, or CBI, to say the British economy now feels second-rate.

Tony Danker said in a speech on Monday at the CBI’s annual conference that the government must find ways to deliver economic growth to all parts of the nation. “I don’t know a country in the world… where governments aren’t active in economic geography,” he said in an apparent swipe at London’s decision to cancel part of a planned upgrade of railway lines in the North of England.

Source: Hellenic Shipping News

Discover our Second Charge Mortgage Broker services.

GBP sterling UK economy pound UK recovery
Marketing No Comments

Pound plunges to yearly low against dollar on underwhelming UK GDP figures

The pound has plunged to its lowest level against the dollar this calendar year driven by traders dumping the currency after fresh data showed the UK economic recovery is stalling.

Pound sterling dipped to day low of $1.3365, the weakest the pound/dollar exchange rate in 2021, following the release of new GDP data from the Office for National Statistics (ONS) this morning.

The fall was triggered by currency traders selling off sterling holdings due to a weaker than expected quarterly UK GDP clip, which came in at an underwhelming 1.3 per cent for the three months to September, soured sentiment toward sterling.

To find out more about how we can assist you with your Second Charge Mortgage please click here

The drop was compounded by currency traders pouring into the dollar after a fiery inflation print published yesterday strengthened the prospect of the US Federal Reserve raising interest rates.

Data from the US Bureau of Labor Statistics shows prices are rising at their fastest pace since 1990 in America.

The pound has rebounded over the last month, but was sent tumbling after the Bank of England last week decided to hold interest rates at a record low 0.1 per cent despite expecting inflation to hit at least five per cent in April next year.

Currencies tend to weaken if inflation is strong due to holders of separate currencies losing purchasing power.

By JACK BARNETT

Source: City AM

Discover our Second Charge Mortgage Broker services.

No-deal Brexit UK economy pound
Marketing No Comments

Impact of Brexit on economy ‘worse than Covid’

The impact of Brexit on the UK economy will be worse in the long run compared to the coronavirus pandemic, the chairman of the Office for Budget Responsibility has said.

Richard Hughes said leaving the EU would reduce the UK’s potential GDP by about 4% in the long term.

He said forecasts showed the pandemic would reduce GDP “by a further 2%”.

“In the long term it is the case that Brexit has a bigger impact than the pandemic”, he told the BBC.

His comments come after the OBR said the cost of living could rise at its fastest rate for 30 years, with suggestions inflation could hit almost 5%.

Speaking after Wednesday’s Budget, Mr Hughes said recent data showed the impact of Brexit was “broadly consistent” with the OBR’s assumption that the leaving the EU would “reduce our long run GDP by around 4%”.

“We think that the effect of the pandemic will reduce that (GDP) output by a further 2%,” he added.

The Treasury has been contacted for comment.

To find out more about how we can assist you with your Second Charge Mortgage please click here

What is GDP and how is it measured?
GDP or Gross Domestic Product is one of the most important ways of showing how well, or badly, an economy is doing. It is a measure – or an attempt to measure – all the activity of companies, governments and individuals in an economy.

In a growing economy, quarterly GDP will be slightly higher than the quarter before, a sign that people are doing more work and getting (on average) a little bit richer. If GDP is falling, then the economy is shrinking.

The UK voted to leave the EU in 2016 and officially left the trading bloc on 31 January 2020, however, both sides agreed to keep many things the same until 31 December 2020, before a new trade deal was announced and implemented on 1 January this year.

Supply chain problems
Both the pandemic and Brexit have played a part in current supply chain issues across the UK, and have further exposed the scarcity of lorry drivers, which has resulted in recent shortages of products for businesses and some empty shelves for customers.

However, in the OBR’s latest report, the independent body said “supply bottlenecks had been exacerbated by changes in the migration and trading regimes following Brexit”.

Supply chain issues has led to the government granting short-term visas to EU workers across certain sectors, including the haulage industry.

The British Poultry Council has said turkey farmers will do their best to ensure Christmas “is as normal as it can be”, but warned shortages are likely, due to a shortage of seasonal overseas workers.

The government has assured consumers that turkeys will be available for the festive season and has also deployed temporary visas in a bid to bolster worker numbers.

Source: BBC

Discover our Second Charge Mortgage Broker services.